Forrest v Australian Securities and Investments Commission & Anor; Fortescue Metals Group Inc v Australian Securities and Investments Commission & Anor

The High Court of Australia considered appeals from decisions of the Federal Court of Australia concerning alleged contraventions of the Corporations Act 2001 (Cth) by Andrew Forrest and Fortescue Metals Group Ltd (FMG). The Australian Securities and Investments Commission (ASIC) alleged that Mr Forrest and FMG had contravened s 1041H of the Corporations Act by making misleading statements to the market regarding FMG's iron ore contracts. Specifically, ASIC contended that statements made by Mr Forrest on behalf of FMG in media releases and interviews in 2004 and 2005 falsely represented that FMG had secured binding contracts for the sale of iron ore when, in fact, the agreements were conditional and subject to further negotiation.

The central legal issue before the High Court was whether the statements made by Mr Forrest and FMG were misleading or deceptive, thereby constituting a contravention of s 1041H of the Corporations Act. This required the Court to determine the proper construction of the statements in question, viewed in their context, and to assess whether a reasonable member of the target audience would have been misled into believing that binding contracts for the sale of iron ore had been irrevocably entered into. The Court also had to consider the application of the statutory defence available under s 1041H(2) for contraventions, which requires a party to prove they acted reasonably and had reasonable grounds to believe, and did believe, that the misleading statement would not be misleading.

The High Court, by majority, found that the statements made by Mr Forrest and FMG were not misleading. The Court reasoned that the language used in the media releases and interviews, when read in its full context, did not convey an unqualified assertion of binding contracts. Instead, the statements were found to be a representation of the progress and intention to secure contracts, acknowledging the existence of agreements that were subject to further steps. The Court emphasised that the assessment of whether a statement is misleading must be made by reference to the likely impression created on the reasonable ordinary member of the public to whom the statement is directed, considering the entire context in which the statement was made. The appeals were allowed, and the orders of the Federal Court were set aside.